Letter from America - Rick Derr

A bright spot hidden amongst declining birth rates

After 20 years working at A.C. Nielsen/D&B Research Company, Rick opened the first Learning Express Toys franchise in the Chicago area in 1996, and then became a sub-franchiser, opening nine more stores. Although leaving the corporate environment behind, he has combined his expertise in data and numbers with a passion for the toy retail space. While the infant market is a small proportion of overall business at Learning Express, Rick notes that gaining and keeping these customers is essential in the long term.

I receive more baby product inquiries and solicitations than any other category in the toy/gift industry. Suppliers are often surprised to hear that the infant category is a very small sliver of our product curation. Not because these aren’t great products or ideas, but rather the audience we attract is not the baby/infant market. The real age for us to “kick in” is around 12-18 months, or that first birthday. Yes, we will sell a core of infant items (the top sellers being a product called SmartNoggin Stik and personalized enamel piggy banks which are a popular gift item), but outside of that the market is small and just does not turn quickly enough to justify the space. In addition, the current birth rate for the US in 2024 is 12.009 births per 1000 people, a 0.12% decline from 2023, and this has been declining since 1950. The forecast until 2100 is a slight decline (Source: Macrotrends).

However, if you peel back the covers of the bassinet, you will find a secret - and that is the characteristics of the infant market are very different than they used to be. The number of abortions in the US (despite the overturn of a 50-year-old ruling) is about the same and stricter immigration policies (restricting people coming into the US legally and illegally) show a decline, despite the news headlines. A larger percentage of babies are being born to older and more financially well-off parents, and there’s a grandparent base with a lot of money to spend on fewer grandchildren. We saw it during the Covid years with this group. If you think of babies as future consumers, they are attractive customers, especially for indie toy/gift shops. The attraction is fewer kids but spending more; fewer transactions but higher ticket averages.

So, while the infant market is a small proportion of our overall business, gaining and keeping these customers is essential in the long term. And that is exactly what we are doing. The age range of the kids we serve has gone up dramatically over the last 5-10 years, despite fears that kids will migrate to screens and video games earlier and earlier. Although they have to some degree, the physical toy market has still grown, and we have embraced this audience of 8–15-year-olds, especially girls. This is evident by looking at the latest wall of birthday boxes we offer our customers each month. (Kids that have a birthday place the toys they really want in the box, we display it, parents tell friends and family their child has a box at Learning Express and the magic happens). The age range of birthday boys and girls taking advantage of this service spans from 4-12 years on average - and many are 10, 11 and 12. Years ago that would not have happened.

A declining birth rate means we must get more out of our existing customers’ wallets – or in essence, a bigger share of the spending pie on toys and games. Here’s our average dollar sale per ticket over the last seven years:

2017 $39.30

2018 $40.87

2019 $40.55

2020 $45.29

2021 $47.70

2022 $48.28

2023 $48.64 (an all-time high).

We believe that ranging up our product mix, while still focusing on catering to and acquiring customers at a very young age will continue to be the key to our growth and profitability. The fashion/tween category has proven this point; in 2023 it represented 10.3 % of dollar sales, ranking ahead of arts & crafts. Five years ago, this category was practically nonexistent in our shop, but our new audience now includes adult Moms when they are looking to gift an item; we provide convenience for her.

Finally, I try to be nice and inform suppliers and inventors of this little secret about the kids’ market—the infant/baby products sector is so much smaller than people think in toy stores. Small, but arguably still important, especially in the long term.